Toyota Case Study (Case 4). Toyota: Origins, Evolution, and Current Prospects

The typical mass-production system established by Henry T. Ford in the early 1900’s is based on the idea that there would be an assembly line that was to produce a limited product line in massive quantities to gain economies of scale. To do this the company needs to stretch its fixed costs that are involved in setting up a specialized machine and the way to do this produce a massive amount of that part of the equipment, store it in warehouses, and change the equipment to produce the next needed part.

In doing this, the employees do the same job continuously and this increases in the likelihood possible errors because without the incentive to be efficient, employees will not be careful. Also, you have to pay managers and foremen to oversee the operations which seem frivolous. This practice does not force employees to take responsibility for their work. Toyota’s manufacturing system is slightly different in that it promotes efficient work, decrease in inventory costs, and production more based on demand.

Toyota took the “main structure” of the mass-production system, but implemented changes based on observations of U. S. companies. First, auto parts were produces in small batches to decrease warehouse costs and to do this they decreased the time to change stamping from days to minutes through different trial and error processes. By doing this Toyota afforded themselves the ability to produce on demand and not have much overhead. Secondly, workers worked together and were responsible for finding their own errors instead of letting it wait until the end where it could be more costly to repair.

If an error is found everyone of the line would stop and fix the error and over time everyone become sufficient in detecting them. By doing this there was also no need to have all of the foremen to overlook employees, again decreasing costs. Toyota’s manufacturing system is cost effective, efficient in production, cost reduction and less overhead, better employee relations, better quality products, and lastly, more profits. The essential differences between the way supplier relations are managed at Toyota and the typical U. S. auto manufacturer are that U. S.

manufacturers tend to believe vertical integration makes the company more efficient by reducing dependence on other firms and control over supply chain would allow management to coordinate the flow of auto parts to the assembly plant. U. S. manufacturers tend to keep a majority of parts to be produced in house because they did not vertically integrate. For the remaining percentage of parts the U. S. firms would ask suppliers to submit contract and they would place an order with the lowest price. The relationship was extremely informal and lacked no personal interaction.

Contrasting is the way Toyota handles their suppliers. Toyota initially followed the American way of vertical integration in the 1930s and 1940s because there were limited Japanese suppliers. During the 1950s manufacturing increased in Japan and Toyota decided to increase their contracts for components. Why did Toyota do this? Toyota wanted to avoid capital expenditures associated with expanding their manufacturing capabilities, reduce risk by maintaining less inventory, decrease wages, and contracting offered high-quality, low cost efforts. Toyota thought the U. S.

way of a “bidding war” was self-defeating and not good business practices. By doing Toyota’s way of business long-term relationships are formed and in the future will decrease costs. The consequences of these differences include a surge in labor productivity, a decrease in the number of defects per car, short setup time, and economical production. Toyota’s approach to customer relations influences its design and production planning process because the philosophy was “equal partners. ” Because of the great relationship with its dealers/suppliers this spurs a good relationship with their customers.

By doing this, Toyota is in tune with what the customers want and it is as if they are taking part in the design and production based on their requests and suggestions. A database compiles all of the customer preferences from style, color, process, luxury features, etc. The information is compiled, sorted, analyzed, and implemented into action on an assembly floor. The implications are that Toyota is going to the customer, changing the way market is done and how effective it is, and the need for precise research and development to take to customer and chart their reactions.

The basis of Toyota’s competitive advantage is efficient production at low costs, but not conceding by way of quality. Toyota has mastered the way of production on the assembly line without producing large inventory amounts. However, relationships not only with suppliers, but with the customers help establish loyalty and the need to want to give feedback. Toyota’s success most certainly can be imitated; however, U. S. companies typically do not do business in this manner. Toyota simply imitated what leaders in the industry were doing when they entered the market, studied their competition, and collaborated to recognize implement new changes.

It is all about trial and error, focus, and team-work; all qualities the Japanese businessmen are known for. Toyota will be able to establish their competitive advantage in the future simply because as their competitors continue to innovate and perform, Toyota is continuing to do well. Toyota achieved its goal of owning at least 15% of the market share and is now the leading car manufacture internationally. Toyota is continuing to grow internationally and specially in North America. Its competitors are closing the gap, but Toyota is maintaining its prowess.

In the future Toyota should focus on the markets in India and the Middle East. In each of these areas the auto industry is beginning to establish itself and citizens are demanding some of the western amenities as their economies start to develop. Even though their infrastructure is not as established and there are not the usual regulations in place, these areas are growing in buying power. Coupled with the corporate expansion the auto industry can take advantage of the increased income. As always, Toyota should continue to focus of their strong hold in North America and Asia.